Why are coffee prices rising?

Concerning the coffee supply chains at Tchibo, what have been the biggest changes in recent years?

Lena Schweighöfer: Generally, Tchibo is strongly committed to its strategic origins, and we also have a fairly stable supplier base. Long-term relationships with our partners and suppliers are very important to us. What has changed in recent years is that we are intensifying the link between our sustainability work in the countries of origin and our purchasing activities. Furthermore, we are no longer focusing solely on certifications but are continuing to expand our own coffee program. I would consider these to be the major changes of recent years.

And what is the difference between your own coffee program and the former certification-based measures?

Schweighöfer: With our Tchibo Coffee Program, we aim to promote positive development, meaning improving the economic situation of coffee producers and supporting adaptation to climate change. We do this in all our sourcing regions and for all our products, regardless of whether it is a classic Fine Milde coffee or a barista product. Our past experience shows that farmers and producers are more motivated to attend training sessions or participate in projects if they are actively involved in designing them. Therefore, we focus on developing truly tailor-made programs together with farmers and producers, addressing their biggest challenges and serving their actual needs.

Mr. Gatali, how are coffee supply chains organized from the producers’ perspective, and where do you see the greatest challenges for farmers today?

Gilbert Gatali: Our organization works with 11 countries across the continent, and generally speaking, most of them face similar challenges. One of these is inadequate access to agronomic best practices – either access is insufficient, not timely, or the practices are not optimal because people are very price-sensitive. Climate change is a major challenge that coffee farmers all over the world are experiencing. In addition, access to affordable financing is also a significant challenge.

Schweighöfer: The way smallholder farmers – and farmers in general – are organized is closely linked to transparency and traceability in coffee supply chains. Because large parts of the 12.5 million smallholder farmers lack formal organizational structures such as cooperatives, achieving full traceability remains very challenging. Intermediaries or middlemen provide important services such as collection, financing, sorting, and warehousing, but traceability is therefore still difficult. However, driven by the EUDR, we are seeing increasing traceability in coffee supply chains.

Gatali: I think there has been an increase and a positive change in transparency within the coffee chain. More transparent information is being shared across the value and supply chain. However, transparency on the origin side still requires much more work.

What specifically is improving, and where are the problems?

Gatali: Today, more than before, farmers have greater clarity and understanding of where their coffee is going, what it will be used for, and potentially even how to add value to it. There is also more information shared with consumers, who now have a better understanding of where coffee comes from, who grows it, and under what conditions. Information is flowing upward: buyers can visit farms and collect information. However, producers are often not privy to information on the buyer’s side. There are also challenges related to margins captured by intermediaries.

A major shortcoming in transparency is the disconnect between production costs and coffee pricing.

Schweighöfer: I appreciate your point about transparency in producing countries, particularly regarding value addition and value distribution. There are studies on who adds what value along the coffee chain and what the average margins are for roasters and retailers. However, you are right that the margins of collectors or middlemen are often not captured in these broader studies. In general, and not only due to current high prices, farmers’ awareness of market prices is increasing. In many countries, producers – including smallholders – actively follow market prices and know what their partners are paying on a given day. They can decide whether to sell immediately or wait for a potential price increase. Due to shortages and high market prices, coffee growers are currently price setters rather than price takers.

We see improvements, but also imbalances and disconnections. What could be done?

Schweighöfer: The sector as a whole needs to further co-invest in programs where traders, exporters, and NGOs collaborate more closely – not only to support farmers in productivity and good agricultural practices, but also in areas such as financial literacy, access to inputs, and financing.

Support is needed not only to build resilience against climate change, but also against price volatility.

Gatali: Ultimately, this is about relationships. Trade should be viewed as a relationship between two entities, not just a buyer and a supplier. Historically, it has been a buyer’s market rather than a seller’s market. This dynamic should shift: producers have a product that buyers need, and buyers have market access that producers need.

So this is about good business for everyone?

Gatali: Exactly. The question is how to build business relationships that allow for open conversations beyond a single season — relationships where both sides feel secure that they will continue working together. If prices rise sharply, benefits should be shared; if prices fall, solutions should be found jointly. Addressing power imbalances requires openness and trust, as well as the assurance that relationships are long-term rather than seasonal.

Schweighöfer: I agree with what you said. At Tchibo, we also believe that trust-based cooperation can improve planning security, which is important for everyone in the supply chain. At the same time, it is crucial that no one is forced into dependency. From a roaster’s perspective, we have experienced situations where accessing coffee from a specific program region was not straightforward because producers are free to sell to whomever they choose. Even with strong partnerships between cooperatives and their members, farmers may ultimately sell to another intermediary offering a slightly higher price. Currently, we see very high competition for coffee at all stages in many countries.

Gatali: Indeed, farmers may sell part of their coffee to their cooperative and another part to intermediaries for various reasons — issues with the cooperative, family or financial needs, or a lack of timely financing. These are real challenges cooperatives face. For a roaster like Tchibo expecting a container from a cooperative, if 20% of farmers do not deliver, the supply is reduced accordingly. This creates challenges in maintaining consistent supply.

Historically, farmers have been price takers, but we are now seeing a shift.

What are the consequences of this shift?

Gatali: It also creates challenges because long-standing imbalances have led to a lack of trust. When people are unsure how long favorable conditions will last, they tend to maximize short-term gains. As a result, more intermediaries enter the market, including actors who are not traditionally part of the coffee industry but see an opportunistic entry point.

What could be done to address these disparities?

Gatali: A key factor is ensuring that information flows in a way people can understand. Creating spaces where intentions and integrity can be questioned – whether actors are thinking long-term or short-term – is important. Policy intervention may also be needed to manage some of these dynamics. Additionally, price risk management remains a major challenge for producers. If they cannot hedge or wait to sell, buyers may need to weather some of this volatility using their own risk management strategies. This situation is pushing stakeholders to have deeper conversations than in the past.

Schweighöfer: One issue we have not yet addressed is climate change, which is where farmers are particularly vulnerable. While a company like Tchibo might source from other regions, a coffee producer could lose an entire harvest. Crop failures are often uninsured, leading to significant income losses. This is a major challenge for the future and requires collective solutions across the sector. As a roaster, Tchibo wants to purchase coffee in 50 years. Addressing climate change is therefore highly relevant.

Climate adaptation costs money. Who should bear these costs?

Schweighöfer: This is a shared effort. Everyone needs to invest in the supply chain and support producers in adapting to climate change. Tchibo is a member of World Coffee Research (WCR), a research and development organization focused on developing more resilient coffee varieties. This is one example of collective action.

We have mentioned high prices recently. What are the main drivers?

Schweighöfer: Weather conditions such as droughts, frosts, and heavy rains – especially in Brazil – are a major factor affecting yields. In addition, warehouses are largely empty, meaning limited stocks in both consuming and producing countries. There are also transportation and supply chain issues, including container shortages, longer shipping times, and port congestion. All of these contribute to the current price volatility.

Gatali: There may also be speculative capital inflows linked to the financialization of coffee markets, as well as some demand shifts. But climate change affecting major suppliers is certainly a key factor.

Ms. Schweighöfer, what does this mean for your pricing strategy and your relationship with German consumers?

Schweighöfer: Higher purchasing prices are generally reflected in retail prices, and figures from the German Coffee Association suggest that the German market has shrunk by a few percentage points due to these increases. Nevertheless, Tchibo continues to see demand for high-quality coffees despite higher prices.

What role do sustainability standards and certifications play in improving supply chains and price stability? You mentioned a shift…

Schweighöfer: The impact of standards on prices is somewhat limited, as certification premiums are often less significant than factors such as yields per hectare or quality differentials. It is important to differentiate between regions and organizational structures. For organized groups with management capacity, training programs, and collective purchasing, certification schemes can be beneficial – for example, Fairtrade, which includes an additional premium alongside a minimum price, although the latter is currently less relevant.

Mr. Gatali, how do farmers view certification schemes? Opportunity or burden?

Gatali: Both. Sustainability standards are tools that improve many aspects of the supply chain, but they are not a solution to price stability or farmers’ prosperity. They support important areas such as health and safety, economic practices, and child labor, and they help producers, cooperatives, and exporters access new markets. However, certifications involve costs, which are often borne by producers and exporters. This can be justified if higher prices offset the investment, but historically this has not always been the case. Certification does not guarantee higher sales, and some buyers prioritize quality over certification. Additionally, returns on these investments may take several years, while producers often lack the financing needed to wait that long.

Ms. Schweighöfer, how do you measure whether sustainability initiatives improve farmers’ livelihoods?

Schweighöfer: We use a set of so-called coffee standard indicators, such as adoption rates, which we collect across all our programs. We further work with Enveritas, anon-profit organization, to monitor changes over time and evaluate our projects, including farmer satisfaction. We are also exploring ways to measure perceived impact, such as changes in life satisfaction in future. While this is less tangible and difficult to quantify, it is an important aspect of understanding the real impact on farmers’ livelihoods.